Pimco wins in bet on inflation: WSJ

DawnLim

NEW YORK (MarketWatch) -- Pacific Investment Management Co., a unit of Allianz SE
ALIZF, -0.37%
recently made gains of $50 million on placing trades on the view that long-term inflation expectations would rise, while Morgan Stanley
MS, -0.91%
suffered tens of millions of dollars in losses in an opposing trade, according to a published report Tuesday. Morgan Stanley bought regular 30-year Treasury securities
TMUBMUSD30Y, -0.12%
bonds not protected against inflation, and shorted 30-year Treasury Inflation Protected Securities, a two-part trading move that made them vulnerable to changing long-term inflation expectations, said The Wall Street Journal, citing people familiar with the matter. TIPS rise in value as inflation increases, protecting investors from inflation. As Pimco bought 30-year TIPS, Morgan Stanley added to its own short position, said the Journal. As demand for 30-year TIPS grew, Morgan Stanley had to unwind a number of its inflation trades, the report said.

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